Loan Picture Improves, Troubles Remain

Published August 31, 2010

Reuters

The U.S. loan picture improved slightly during the second quarter, with the amount of loans 90 days or more past due declining for the first time in more than four years, bank regulators said on Tuesday.

The Federal Deposit Insurance Corp revealed some encouraging figures about the bank industry, saying the sector earned $21.6 billion during the quarter largely due to banks putting away less money to cover expected loan losses.

During the first quarter, the industry earned $17.8 billion.

In other signs of improvement, the total assets of banks characterized as "problem" institutions fell during the quarter to $403 billion from $431 billion, and the FDIC's insurance fund increased by $5.5 billion during the quarter.

But there are still troubling indicators.

Loan balances continued to decline during the second quarter, with net loan and lease balances declining by 1.3 percent. Loans to small businesses and farms -- a major focus of the Obama administration -- fell by 1.8 percent during the quarter.